News

ServiceSource Reports Second Quarter 2019 Financial Results

Total Revenue of $52.4 million

GAAP Net Loss of $6.0 million; Non-GAAP Net Loss of $2.1 million

Adjusted EBITDA of negative $0.5 million

Revises full-year Revenue outlook and affirms break-even Adjusted EBITDA expectation

DENVER, August 7, 2019 – ServiceSource (NASDAQ: SREV), the digital customer journey experience company, today announced financial results for the three months ended June 30, 2019.

“Our teams performed well this quarter in light of what we anticipated to be a challenging year-over-year revenue comparable. We drove ongoing operational discipline throughout the business, accreted cash during the quarter, and had positive Adjusted EBITDA on a year-to-date basis while pushing forward with our digital transformation strategy and investments,” said Gary B. Moore, Chairman and CEO of ServiceSource. “We are making adjustments for sales activity and results that are below expectations and lead to a reduced full-year revenue outlook, but we remain encouraged by signs that our Customer Journey Experience (CJX) solution suite is further differentiating us as a strategic partner and thought leader in the marketplace. We will continue to take decisive action to right-size the business for our current outlook while ensuring our resources and investments are aligned to the market opportunity to drive long-term value for our stockholders.”

Key Financial Results – Second Quarter 2019

  • GAAP revenue was $52.4 million, compared with $61.1 million reported for Q2 2018.
  • GAAP net loss was $6.0 million or $0.06 per diluted share, compared with GAAP net loss of $8.9 million or $0.10 per diluted share reported for Q2 2018.
  • Non-GAAP net loss was $2.1 million or $0.02 per diluted share, compared with non-GAAP net income of $0.8 million or $0.01 per diluted share reported for Q2 2018.
  • Adjusted EBITDA was negative $0.5 million, compared with positive Adjusted EBITDA of $3.2 million reported for Q2 2018.
  • Positive free cash flow of $1.4 million to end the quarter with $27.9 million of cash and cash equivalents and restricted cash and no borrowings under the Company’s $40.0 million revolving line of credit.

A reconciliation of GAAP to non-GAAP financial measures is provided following the Condensed Consolidated Financial Statement tables contained within this press release.

Key Business Highlights – Second Quarter 2019

  • Expanded revenue with four of the top 10 clients in the second quarter, with cumulative trailing 12 month revenue growth of 3.6% across the same top 10 clients.
  • Began ramping and scaling previously announced wins with a global leader in the cloud infrastructure-as-a-service market which has grown more than 80% during the trailing 12 month period.
  • Successfully renewed or extended more than 85% of the value that was up for renewal year-to-date.
  • Recruited and onboarded key senior-level hires, including a new VP of Learning & Development to lead the Company’s global talent development initiatives and a new VP of Global Sales Delivery Practices to lead the Company’s professional services and client engagement architecture teams.
  • Rationalized and exited more than 10% of the NALA real estate footprint to improve capacity utilization rates.
  • Realigned and unified the Company’s go-to-market activities and global account management teams under a single executive leader.

“We continued to demonstrate good operational progress and execution to our strategic plan during the second quarter. Our global account management investments and the efforts across our end-to-end engagement model drove favorable results in client satisfaction and retention, while our profitability and cash flow performance was above our expectations despite the topline pressure caused by last year’s churn events,” said Richard G. Walker, CFO of ServiceSource. “As we look to the balance of this year, in light of recent unanticipated challenges that have caused sales pipeline and bookings activity to fall short of our expectations, we now expect fiscal 2019 revenue to be down approximately 10-12% year-over-year versus our previous range of down 3-5% year-over-year. We have enacted changes in our go-to-market efforts that we believe will improve our sales execution and results. Though we are disappointed with the current revenue outlook, we are aggressively managing our cost structure and are reaffirming our expectation for approximately break-even Adjusted EBITDA for the year, while importantly maintaining the pace of transformational investments that we believe set the stage to deliver on our multi-year growth objectives and roadmap.”

Quarterly Conference Call

ServiceSource will discuss its second quarter 2019 results on August 8, 2019, via teleconference at 9:30 a.m. Eastern Time. To access the call within the U.S., please dial (877) 293-5486, or outside the U.S. (914) 495-8592, at least five minutes prior to the start time. Conference ID number: 8769613. In addition, a live webcast of the call will also be available on the Investor Relations section of the ServiceSource website under Events and Presentations. A replay of the webcast will also be available on the Company’s website at http://ir.servicesource.com.

Forward-Looking Statements

This press release contains forward-looking statements, including statements regarding our expectations for financial and operational performance, whether our digital transformation strategy will produce anticipated benefits, and whether our improved execution and emerging capabilities will translate into desired results. These forward-looking statements are based on our current assumptions and beliefs, and involve risks and uncertainties that could cause our results to differ materially from our forward-looking statements. Those risks and uncertainties include: a decline in client renewals, the loss of one or more of our key clients or the contraction in our revenue from one or more of our key clients, in each case resulting in churn, or our clients not expanding their relationships with us; the risk of problems implementing our technologies or that our technologies will not meet client expectations; that the market for our solution is underdeveloped and may not grow; errors in estimates as to the renewal rate improvements and/or service revenue we can generate for our clients; changes in market conditions that impact our ability to sell our solutions and/or generate service revenue on our clients’ behalf; the possibility that our estimates of service revenue, contract value, bookings, and other metrics may prove inaccurate; our ability to keep customer data and other confidential information secure; our ability to adapt our solution to changes in the market or new competition; problems encountered by our clients in their business that may cause them to cancel or reduce their business with us; our ability to achieve our expected benefits from international expansion; economic or other adverse events or conditions affecting the technology industry; our ability to protect our intellectual property rights; the risk of claims that our offerings infringe the intellectual property rights of others; and other risks and uncertainties described more fully in our periodic reports filed with the Securities and Exchange Commission, which can be obtained online at the Commission’s website at http://www.sec.gov. All forward-looking statements in this press release are based on information currently available to us, and except as may be legally required we assume no obligation to update these forward-looking statements.

About ServiceSource

ServiceSource International, Inc. (NASDAQ: SREV) brings the world’s greatest brands closer to their customers through digitally-enabled solutions and data-driven insights that personalize and power the moments that matter. Backed by 20 years of experience, an industry-leading technology platform, a robust global footprint and a powerful suite of solutions that enhance every touchpoint along the Customer Journey Experience (CJX), we deliver impactful revenue growth for global market leaders. Operating out of eight countries with more than 3,000 sales delivery professionals speaking 45 languages, ServiceSource drives billions of dollars in client value annually. To learn more about how we help our clients more effectively find, convert, nurture, grow and retain their customers, visit www.servicesource.com.